Chen (2004)

Management > Asian Management > Lectures > Independent Research > Chen - China > Issues with CSEs

Further issues

The structural and managerial problems of the CSEs stemmed from the fact that the management system was imported and was far too bureaucratic. Managers were expected to be "red" and specialist in their own small fields, meaning that loyalty to the Communist government took priority over efficiency of production.

This also meant that distribution of power was unclear and depended upon the relationship between managers and government officials.

The state protected the workers, so they could complain against management.

As well as supporting the Party system, CSEs had to support two additional systems which were not linked to core activities:

Life-support system - supporting the workers and their families, including schools, healthcare, recreational trips and housing
Socio-political support system - cultivating a loyal workforce to the Party, including the establishment of various worker federations, such as the All-China Federation of Trade Unions (ACFTU)

CSEs existed in a system where managers which could not be fired. This was known as the "iron ruling chair". Managers used "political indoctrination", rather than legal or economic incentives to promote efficiency.

Any income the CSE earned it had to deliver to the government and since the company was dependent on the state for all financial assistance, it was "eating out of the iron rice bowl of the state"